4 hours ago
Hiring has slowed sharply across many advanced economies, but companies may simply be getting better at selecting the right candidates, according to Goldman Sachs.
This improvement is partly reflected in a decline in short-term job separations—workers leaving or losing jobs shortly after being hired. This trend suggests that firms and workers are increasingly finding better matches from the outset, even as labor markets cool following the post-pandemic hiring surge.
"Most of the pullback in churn reflects a decline in job separations within one or two quarters after hiring, a pattern that suggests that workers and firms have gotten better at identifying 'good' matches over time," Goldman Sachs economists wrote in a note released Tuesday.
Historically, short-term separations were common because some hires turned out to be poor fits between employers and employees. However, these separations have steadily decreased across developed economies over the past two decades, with the decline accelerating after the pandemic.
This trend is supported by data from the US Census Bureau and Canadian labor force statistics.
Fewer Bad Hires
The decline in early job exits appears widespread across industries and is linked to changes in workforce composition, indicating a structural shift in how workers and firms form job matches.
"In our opinion, the best explanation of the decline in short-term separations is that increased information and improved screening processes have increased both firms' and workers' ability to identify 'good' matches," the Goldman economists explained.
Platforms such as LinkedIn, Glassdoor, and Indeed provide workers with insights into company culture and working conditions before accepting roles. Simultaneously, employers are increasingly using digital screening tools—including AI—to evaluate candidates and screen applicants.
These tools may help reduce hiring mistakes, the economists noted.
Better matches lead to fewer early job exits and reduce the need for companies to hire replacements.
This shift could also enhance overall labor market efficiency. With fewer failed job matches, there is less frictional unemployment—the type of joblessness that occurs when workers transition between jobs.
Goldman's analysis comes amid ongoing debate about the current labor market, which some economists describe as a "low hiring, low firing" environment.
In such a setting, a further drop in hiring could cause unemployment to rise more quickly, as displaced and younger workers face fewer opportunities.
